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Airex
Marketing Plan

4.1 DEFINITIONS

The Market- According to CETESB, there are approximately 33,000 industries in the Sao Paulo metropolitan area generating 50 million tons of solid residues per year. These residues can be classified in three groups (1995):

Some industries and their residues volume per year are presented below. (Source: CEMPPE4, 1996.)

Volume, of Residues [ton/yearl
COMPANIES
ItemTexacoGessy
Lever
Spal CokeMercedes
Benz
SonyBlindexProcter
Gamble
Santista
Plastics434301,01727295------279
Metals9136170------3222616106
Paper68806202,65560316111872
Glass52264,30068------2,900------------
Wood-----45-----4,972------101-----------
Cloth---------------396-----------------------

The data indicated above together with the information in the Market Research section set up some of the fundamental building blocks on which our venture relies.

Opportunity - The potential for our services in the Brazilian market is enormous. The states of Sao Paulo, Rio de Janeiro, Parana and Minas Gerais concentrate more than 50% of the Brazilian industries. Economic and industrial activities are growing steadily, as are the industrial residues.

Relevant Targets - Our target market will be those companies (and also their suppliers) that have some or all of the following characteristics:

We will segment our target market by industry, for example metallurgy, paper, chemical, etc., and by the type of residues generated. This will allow us to concentrate our energy and to focus on them. This approach belongs to the TOTAL SOLUTION® strategy.

According to an interview with the present executive director of CEMPRE, other factors that reinforce the growth of the environmental industry are:

4.2 COMPETITORS, RISKS AND OTHER INFLUENCES

Level of Competition - The level of competition is low. There are no companies in the market that have a proposal like ours: to manage all waste released by a company, either with commercial value or not, in a safe way.

The main competitors are the current companies that collect specific types of scrap. Most of these companies are small, offering amateurish services with low scale economies in their operations. Other competitors are the current large companies whose core business is the collection of domestic waste and non-recyclable materials. They generally take the waste to landfills or to incinerators.

We believe that our success will stimulate the creation of new companies. Nevertheless, we believe we will be able to sustain competitive advantages due to:

Risks - After evaluating the critical elements of the investment and business risk, we have come to the conclusion that there is an acceptable overall risk for the AIREX concept for the following reasons:
  1. Industry: we will be a pioneer in a nascent industry. However, this industry has great potential. Risk: medium.
  2. Competitive position: we will have good position in a fragmented industry. Risk: low.
  3. Demand assumptions: while sales forecasts are difficult to forecast, interest is high and sales estimates are believed to be conservative. Risk: medium.
  4. Technological and operational obsolescence: new operational and technological processes will likely reduce the quantity of waste generated. However, this will not only be a slow process, but not all companies will be willing to pay for the changes required. Some industries will be very difficult and costly to change. We believe there will always be an industrial waste demand. Risk: low increasing to medium.

4.3 MARKETING STRATEGY

Our strategy to attract clients will rely on three key factors:

1 TOTAL SOLUTION® - We will offer our clients a complete solution to their waste problems. This solution ranges from waste collection to its final destination, whether recycling, landfilling, incinerating or storing. Companies become overburdened when they have to deal with multiple waste processors, as is the case today. From our clients' point of view, convenience and service quality are the greatest strengths of our company (more details in the Market Research section). Most current waste processors are small companies operating in a very amateurish way, and problems arise too often. We have, with TOTAL SOLUTION®, received enthusiastic feedback from our potential customers. Companies will be able to concentrate on their core business, leaving the solution of their waste problems to a competent partner like us. In some cases, we may even be able to absorb our clients' personnel and equipment when necessary. This strategy aims to develop a strong relationship with our clients that will allow us understand their needs and provide them with the highest quality of services.

2 Ethics - We detected during our market research that the market is anxiously looking for, but not finding, companies they can trust. This is a major concern for our clients, as the responsibility for the final destination of the residue remains with the waste generator and can not be transferred to the waste transporter or processor.

3 ISO 14000 - We believe that, during the ensuing years, Brazilian industries will be working to obtain ISO 14000 certificates, aiming for international competitiveness. One of our strategies is to offer services in compliance with the requirements of ISO 14000. As all five members of AIREX have a solid, quality-oriented focus acquired through professional experience, this will be a strong point for our company.

Sales Strategy

Once face-to-face with our customer, we will be unique in our creative and flexible approach in order to solve our clients' waste problems. Our approach will be that of a consulting firm. We will visit the customer and investigate which residues the industry has. We will manage and collect whatever residues exist. This will be done by the directors in order to reinforce trust and reliability of our customers.

The process begins with an evaluation meeting with our future client where our representative will analyze the scrap output and recommend the most efficient collection system. Pick-up will be scheduled on an as-needed basis or on a regular schedule, depending on the situation. The client's needs can be met by a variety of equipment, including special trucks. After the initial consultation, a comprehensive and customized proposal will be submitted to the customer. The result will be a program that fits neatly into an organization's day-to-day activities as well as its long-term planning.

Pricing strategy and profitability

Waste collection and disposal - The model below shows the waste collection and disposal process as it exists today. As you can see, in the case of non-recyclables, the client pays approximately 150% above the waste processors' market price (P) due to the layers of middlemen. In the case of recyclables, the client receives approximately 68% of the waste processors' market price (P).

As you can see below, with AIREX acting as the sole middleman, the customer actually pays less in the case of non-recyclables and receives more in the case of recyclables.

We can guarantee a better price for our clients for the following reasons:

As an example, the current situation of NSK is presented below, with the financial benefits of having AIREX services:

ResidueCurrent Revenue [US$/ton]AIREX price [US$/ton]*Variation
Paper4448+9%
Metal350400+14%
* according to our financial projections (see Annex 3).

It is important to mention that not only does the client benefit from this pricing structure, but AIREX does also. AIREX will be able to realize healthy profits even though we will maintain lower margins for the following reasons:
  1. We will maintain a lean cost structure;
  2. We will dispose of waste in large quantities, thus enjoying lower costs and economies of scale.

Waste management - This concept can lead us to greater profits. We will charge each client for the supervisor's work (average of US$1,000 per month), who will instruct and coordinate the collection of residues.

Technical consulting - Our consulting services will start in the second year and will be charged on an hourly basis (US$200 per hour).

Advertisement, Public Relations and Promotion

In order to promote AIREX, we will participate in seminars regarding waste management. We believe this will be a very efficient communication tool because we will have direct access to a whole host of companies related to or interested in the industry. Another type of promotion will be to write technical articles for specialized magazines. These articles will describe our successes as they happen. In magazine advertisements, we believe that endorsements made by our customers will be a very profitable way of pushing our message through. It will enhance both our company's and our client's image. Finally, we will set up an Internet home-page describing our services and successful experiences.

For a more focused approach, we will always be in touch with CETESB and FIESP in an effort to forge strong relationships with them. This will be a very effective channel for finding out who might need our services. Some contacts have already been established with CETESB. They are very enthusiastic about our business because they think that the market needs a company with our profile: an environmentally-conscious company with an unquestionable reputation. We believe that our goals are very closely related and that we can help each other.

Another entity that has shown enthusiasm for our project is FIESP. The concerns and demands on environment protection are growing steadily, and we will be able to serve them exactly as they need.

Once we target a company, we will try to arrange a personal interview. We will also send literature, via direct mail and/or fax, to our clients and prospects as a way of catching their attention.

In addition to the above mentioned marketing tools, we are sure that our own network of business companies arranged through many years in the market will bring very positive results.

Partnerships - Since our aim is to establish long-term contracts with our customers, our local supervisor will be of key importance for the maintenance of a strong partnership with the client. The supervisor is crucial because he or she is the one responsible for the "moments of truth", the everyday face-to-face contact with the customer.

Additional key partners will be the waste transporters and processors. Usually these companies are very small and their access to the major companies is limited. We can provide them with services through our contacts with the major industrial waste producers.

The last step in the chain is the actual waste disposal, e.g., through an incinerator or a landfill. We will establish long-term relationships with these providers which will improve our operations.

Placement Analvsis

AIREX will be strategically located next to the major industrial area of Brazil, where most of our target customers are located. Transportation is one of the key cost components for our business, and a central location will minimize fuel expenses and will improve truck productivity.

Budgets

Our budget for sales and marketing is 3% of total revenues. This will cover expenses such as travel, events and advertisement.

4.4 MARKET RESEARCH

Through direct research of four companies, we gathered the following data [ton/year]:

ItemAlcoa
(Packaging)
Philips
(Components)
Siemens
(Transformers)
Leiner Davis
Gelatin
Plastics1,11696----------
Metals-----670258-----
Paper10836048-----
Glass-----2,640----------
Wood-----48084-----
Aerobic Mud---------------3,600
Anaerobic Mud---------------60
Grease---------------1,440

Two important points resulted from this research:

  1. The declared quantities are similar to some of those indicated in CEMPRE'S data presented earlier.
  2. The response of all the industries interviewed towards our venture was very positive, particularly in reference to the TOTAL S0LUTION®, and to the guarantee of an ethical attitude towards the management of residues. That means our venture represents to the companies interviewed an agent that will help them to obtain the ISO 14000 certification9.

4.5 SALES FORECAST

Most of the companies interviewed are very concerned about environmental issues. Based on this information, we forecasted our revenues and increases in market demand as follows:
Revenues Composition and Evolution

All the data collected indicates that it will be possible to have 10 customers by the end of the first year. This number will increase to 20, 30, 45 and 80 respectively in the following years10. We believe that this is a conservative target when compared to the potential market.

It can be noted that the consulting revenues will start only in the second year and will represent approximately 11% of the total sales by the end of the fifth year.

4CEMPRE is a non-profit organization bringing 12 industries together, some of which are Coca-Cola, PepsiCo, Gessy Lever, Mercedes-Benz, Nestle, Procter & Gamble, Rhodia... CEMPRE is committed to help developing the recycling of solid residues.
5 NSK is a large metallurgical company and one of our potential customers.
6 We expect that each supervisor will work for an average of 6 clients. See Annex 1.
7 Sao Paulo state industry organization, the biggest in South America, with more than 30,000 associates.
8 Concept presented in the book "Moment of Truth" written by J. Carlzon.
9 See letters with the opinion of the industries (Annex 1).
10 The projections indicate an average of 6 clients for the first year.

AIREX
Table of ContentsAppendices
1. Executive Summary
2. Business Description
3. Products and Services
4. Marketing Plan
5. Operational Plan
6. Management and Organization
7. Capital Structure
8. Financial Projections
9. Conclusion
Depreciation Schedule
Letters of Reference
Resumes of Management
General Assumptions
Detailed Cash Flow
Investments
All information herein is confidential and belongs to AIREX.